ISU study shows EPA's proposal to slash RFS is wrong move

A new analysis by the Center for Agriculture and Rural Development (CARD) at Iowa State University demonstrates that the Congressionally-approved federal Renewable Fuel Standard (RFS) ethanol target of 15 billion gallons in 2016 is attainable, thanks to sales of E15 and E85.

DON'T CUT RFS: "The study clearly shows EPA's decision to slash ethanol targets under the RFS is unwarranted," says IRFA's Monte Shaw. "EPA's proposal is creating a problem, not responding to one. When E85 is priced competitively, flex-fuel vehicle owners like to take advantage of the cleaner-burning, lower-cost fuel."

"The analysis by Iowa State clearly and concisely demonstrates that EPA's decision to slash ethanol targets under the RFS is unwarranted," says IRFA executive director Monte Shaw. "Simply put, the EPA's RFS proposal is creating a problem, not responding to one. When E85 is priced competitively, flex-fuel vehicle owners like to take advantage of the cleaner-burning, lower-cost fuel. Furthermore, with the USDA committing $100 million to expanding ethanol infrastructure, opportunities to save with E15 and E85 are only growing making the EPA's ethanol cuts even more superfluous."

EPA is proposing to cut the ethanol targets called for by RFS
On May 29 earlier this year, the Environmental Protection Agency proposed to dramatically decrease ethanol volume targets under the RFS, from 15 billion gallons in 2016 to 14 billion gallons which is less than what was produced nationwide in 2014.

ISU professor of economics Bruce Babcock and associate professor of economics Sebastien Pouliot recently released their study which is titled "How Much Ethanol Can Be Consumed in E85?" The study shows sales of E15 and E85 make the RFS cuts unnecessary. The study was funded by the National Science Foundation, and the Biobased Industry Center and the USDA Policy Research Center at ISU.

"Our results show that meeting the original 15 billion gallon RFS ethanol target in 2016 is feasible," the professors stated in the study. "The two key conditions needed to meet this consumption level are to allow the market for RINs to work as intended which will allow the price of E85 to fall to induce consumers to buy the fuel, and for EPA to set a consistent policy signal to industry that they will indeed have to meet this target."

Flex-fuel vehicle owners will buy E85 if priced to save them money
"Our analysis here, based on newly available data, shows that a significant proportion of FFV owners will buy E85 if it is priced to save them money on a cost-per-mile basis," the professors added. "Perhaps what is surprising is that EPA's proposed decision to cut ethanol mandates reveals so little faith in their own compliance mechanism: the RIN trading system."

Renewable Identification Numbers, or RINs, are numbered certificates that obligated parties use to demonstrate compliance with the RFS. Obligated parties obtain RINs by blending renewable fuels into the nation's fuel supply, or by purchasing them on the open market from other obligated parties. The professors noted, "EPA set up the RIN trading system to create the incentive to invest in the infrastructure that is needed to expand the consumption of biofuels which, in turn, lowers RIN price."

EPA needs to be more consistent in policy on the RFS
The professors also added, "Consistency in policy is needed to get regulated industry to make the investments needed to be able to comply with the policy. A rollback of biofuel mandates would demonstrate to future regulated industries that instead of using their resources to lower the cost of meeting regulations, they could instead use their resources to lobby for a reduction in the stringency of the regulations."

Iowa is the nation's leading state for production of biofuels
Iowa is the nation's leader in renewable fuels production. Iowa has 42 ethanol refineries capable of producing more than 3.8 billion gallons annually, including 22 million gallons of annual cellulosic ethanol production capacity and one cellulosic ethanol facility currently under construction. In addition, Iowa has 12 biodiesel facilities with the capacity to produce nearly 315 million gallons annually.

The Iowa Renewable Fuels Association was formed in 2002 to represent the state's liquid renewable fuels industry. The trade group fosters the development and growth of the renewable fuels industry in Iowa through education, promotion, legislation and infrastructure development. For information visit the IRFA website IowaRFA.org.